Autumn Budget 2021: The Tricks and Treats

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A Budget is always a tense time, and a Budget whilst the country’s finances are in such turmoil is even more of a concern. 

For many landlords and tenants, the past 18 months have been a really testing time, with Covid causing heartache for a multitude of reasons. However, as we look to the future is there a glimmer of hope on the horizon?

The Chancellor Rishi Sunak, a man who has been both revered and hated throughout the pandemic, took to the floor today to announce the terms of the 2021 Budget. It was a positive start, with investment into a high skilled economy, backing business and praise for imagination and drive, help for families and provision of tools to build better lives. And of course, the inevitable talk of levelling up. 

Sunak noted that the Budget didn’t draw a line under Covid though, instead had been designed to welcome a new age of optimism, and build a stronger economy for the future.

Given the rising inflation though, this Budget was never going to be overflowing with milk and honey. There were still a few stings in the tail, despite being wrapped up in boundless enthusiasm and catchy charm.

Inflation rises

Predictions in March suggested that inflation rises could be as high as 1.5%. Mr Sunak confirmed that the actual figure is now closer to 3.1%, with 4% expected over the next year. Two global forces were blamed: demands for goods overtaking supply, and energy demand putting strain on prices. 

These twin supply chain crises are bad news for our day-to-day living costs, with basics like your weekly food shops spiking. This could be bad news for landlords (not just in your own back pocket) but if you have tenants who are living close to the breadline. However, a £500 million household support fund, for children and families, could offer some help where it is needed. 

For many though, if it is a choice between feeding their family, or paying their full rent, tough decisions may have to be made. 

Bank of England base rate hike

Linked to inflation is the Bank of England base rate. We are expecting this to climb, which will have a steady but significant impact on mortgage rates, bad news for homeowners and landlords alike.

Personal costs

Tax is always a sticking point when the Budget rolls around, and National Insurance is a standard bedfellow for the inevitable squeeze on income. 

Anyone who is earning over £9,568 annually will be digging a little deeper for NI, with a rise from 12% to 13.25% from April 2022, in a rise allocated to Health and Social care. For incomes of £30,000, this represents an increase of £255. 

It’s not all bad news though…

As already announced by Boris Johnson, the Chancellor has confirmed that the National Living Wage is planned to rise from £8.91 per hour, to £9.50. This 6.6% increase for everyone aged 23 and over is more than double the rate of inflation. Overall, Sunak revealed that wages have grown 3.5% since February 2020, which good news for everyone. 

Hopefully this will go some way to easing the pressure on many tenants, and therefore landlords. More tenants are likely to be feeling stable in their role too – unemployment was expected to peak at 12%, whereas it is now expected to peak at 5%. This means there are two million less people unemployed than previously feared, which is something of a relief. 

Levelling up

The national infrastructure project invests heavily ensuring that no matter where you live, you have the same opportunities. £5.7 billion is being invested in ‘London style’ transport strategies across the country, with projects including:

  • Improvements to road networks in Yorkshire, benefiting motor vehicle, cyclists and pedestrians
  • Light rail projects in Manchester, Darlington, Middlesbrough, Liverpool and Runcorn

Investments in Greater Manchester will total over £1.07 billion, £1.05 billion in the West Midlands, over £800 million in West Yorkshire, over £700 million in Liverpool City, £570 million in South Yorkshire, West of England will see nearly £550m and Tees Valley just over £300 million.

Innovation is also being invested in heavily, with the government planning on spending £20 billion a year on Research and Development, in addition to R&D tax reliefs available across business. In 2018, R&D represented just 0.7% of GDP, but by the end of the Conservative parliament, Sunak plans to increase this to 1.1%. To put this into perspective, internationally the figure sits at only 0.7%. 

This is great news for investors in rental properties. Better transport links are huge draws for business, and exciting organisations with great prospects for employees brings vitality and excitement to an area  – enticing more potential tenants, and a better prospect for landlords! 

Developing new homes

Confirmed £11.5 billion for new affordable home build, a 20% bigger than previous pledge. Looking to bring swathes of Brownfield sites into use with the help of £65 million and unlock the potential to build a million new homes. How many of these homes will be available to be purchased by landlords is yet to be seen. 

Cladding

Landlords battling with cladding nightmares will be delighted to hear that a £5 billion pot has been allocated to remove unsafe cladding from high rise residential buildings across the country. This fund has been partly secured through the Residential Properties Developers Tax, a 4% levy brought against developers who boast a profit of over £25 million annually. 

Capital Gains Tax

Always a favourite for landlords! But don’t panic, this ISN’T bad news! The Chancellor didn’t reveal this change in his speech, but in the post Budget paperwork it has been announced that the Capital Gains Tax payment deadline of 30 days is being extended to 60 days as of midnight. A huge relief to many!   

Rough sleeping

An additional £630 million funding has been allocated to tackle rough sleeping, the figures of which have mercifully seen a reduction. This could mean that landlords could see more local councils putting together enticing incentive plans, encouraging them to get involved in shared schemes, working together to house individuals in their local authority area. 

 

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